The government posted a deficit of RON 69.8 billion (EUR 13.8 billion) in the first half (H1) of 2025, 9.6% or RON 6.1 billion more compared to the same period last year, according to data published by the Ministry of Finance. In the second quarter (Q2) alone, however, the deficit narrowed by 5.9% y/y to RON 26.1 billion.
Based on the official GDP forecast for this year, the deficit-to-GDP ratio reached 3.68% at the end of June, compared to 3.62% in the same period of 2024. The balance’s deterioration in Q1, when it reached 2.3%, was not fully offset by the slightly better performance in Q2.
In H2, however, and particularly after the first package of budgetary reforms came into force on August 1, the government expects further improvements, resulting in a full-year cash budget gap of under 8% of GDP, compared to 8.65% last year. This was the informal target mentioned by prime minister Ilie Bolojan after the first package of budgetary reforms and before the second package expected in the coming couple of quarters.
Filtering out the effects of the transfers (grants) from the EU budget in terms of both revenues and expenditures, Romania’s public budget has slightly deteriorated in H1 to 3.43% of GDP from 3.31% in the same period of 2024. The dynamics reversed in Q2, when the deficit contracted by 3.0% y/y nominally (to RON 23.7 billion) and the deficit-to-GDP ratio improved to 1.2% of GDO from 1.4% in the same period of 2024.
The budget revenues increased by 12.7% year-over-year (y/y) to RON 310.5 billion, or 16.4% of GDP in H1, up from 15.7% of GDP in the same period last year. The increase was the result of a modest 6.9% y/y advance in Q1, followed by a robust 18.0% y/y surge in Q2. Most of the improvement in Q2 was owed to a 132% y/y surge of transfers from the EU budget (from 0.4% of the year’s GDP in 2024 to 0.8% of the year’s GDP in 2025).
Tax revenues increased by 11.9% year-over-year (y/y) to RON 152.5 billion in H1. The annual growth rate improved from 10.0% y/y in Q1 to 13.5% y/y in Q2. The improvement was largely due to disappointing net VAT collection in Q1 (-2.7% y/y), possibly reflecting deferred VAT reimbursement at the end of 2024.
The budget revenues without the transfers (grants) from the EU budget increased by 11.4% y/y to RON 285.5 billion in H1, while the transfers rose by 30.9% y/y to RON 25.1 billion.
The budget expenditures increased by 12.1% y/y to RON 380.3 billion or 20.1% of GDP in H1, compared to 19.3% of GDP in the same period last year. The annual growth rate accelerated from 10.1% y/y in Q1 to 4.1% y/y in Q2 – but this was because of significant expenditures financed from EU grants in Q2: +80% y/y to RON 18.3 billion.
Without the expenditures financed from EU transfers (grants), the expenditures increased by 11.3% y/y to RON 350.4 billion in H1, with the quarterly growth rates actually decelerating from +12.8% y/y in Q1 (due to payments deferred from 2024) to +10.0% y/y in Q2.
(Photo: Ruletkka/ Dreamstime)
iulian@romania-insider.com
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